Germany split on how to handle Russian rouble crisis

BRUSSELS - Dominant figures on the left and right in Berlin have voiced different views on how the EU should handle Russia’s rouble crisis.

Wolfgang Schaeuble, the finance minister from the centre-right CDU party in the grand coalition, showed little sympathy in an interview with the Rheinische Post daily on Christmas eve (24 December).

“Of course, we are concerned about the developments in Russia … But that doesn’t mean we accept that Russia can impose its interests by military means. The annexation of Crimea and Russia’s permanent violation of the ceasefire in Ukraine cannot remain without consequences. I hope every day that Russia will return to co-operation with the West, but until then we are sticking to the sanctions”, Schaeuble said.

Asked what consequences a Russian default could have for Europe, he added: “It is up to Moscow to prevent them”.

But the centre-left SPD’s foreign minister, Frank-Walter Steinmeier, speaking in Der Spiegel one day earlier, said a Russian economic collapse is dangerous for Europe.

Steinmeier said the current situation “can’t allow us to go straight back to business as usual”.

But he added: “I'm worried. This is why I oppose any further tightening of the sanctions. Anyone who wants to bring the Russian economy to its knees is completely mistaken if they think that this will bring about greater security in Europe”.

“It cannot be in our interests for this to spiral completely out of control. We should bear this in mind in our sanctions policy”.

Steinmeier said the EU and Nato should hold more talks with Russia to alleviate its trade concerns and to avoid the risk of an accidental military confrontation.

“Even during the coldest days of the Cold War, these types of talks [between Nato and Russia military experts] were held. What manoeuvres, movements of troops, and overflights are taking place? We need to talk about such things”, he noted.

He also ruled out the idea of Ukraine joining Nato in the near future.

“This [Ukraine accession] wasn’t even raised at the last Nato council meeting, let alone debated. Sometimes what is not said at a summit is also important”.

The German comments came ahead of Ukraine-Russia peace talks in Minsk on Christmas eve and ahead of an EU foreign ministers’ debate on Russia sanctions on 19 January.

The peace talks broke off without a result, but are expected to resume on Friday.

Meanwhile, the Russian rouble stabilised this week after plunging to record lows against the dollar earlier in the month.

But a leading US ratings agency, Standard & Poor’s, warned on Thursday (25 December) it might downgrade Russian bonds to “junk” status in January.

Dmitry Polevoy, the ING Bank’s chief economist on Russia, also told Reuters that “near-term prospects for the rouble remain highly uncertain”.

The rouble crisis has seen the price of basic commodities, such as bread, rise steeply in 2014.

The main cause is a prolonged slump in oil prices. But EU sanctions on Russian banks and energy firms are making matters worse by stopping the blacklisted firms from buying debt on international markets.

Three listed banks - Sberbank, Vnesheconombank, and VTB - have appealed the EU measures in the EU court in Luxembourg on technical grounds.

The EU has suffered a series of high-profile court defeats on sanctions in Iran and Palestine due to lack of hard information shared by member states with judges.

But a court challenge can take up to two years to reach a verdict and no listed company has ever won financial damages from the EU tribunal.